Editor's Note: Our veteran China analyst Felix Wang flagged Sea Limited (SEA) as a best idea short on 12/10/21. Below is a complimentary look at some of his research on the company.
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Here's What Felix said Today On The Call & Twitter
HERE'S A LOOK AT WHAT HAPPENED TO SHARES OF SEA LIMITED
Wang: SE has been a paradigm of a successful growth company. When we added SE to our Best Idea Short list on Dec 10th, the stock had soared 17x its IPO price of $15 back in Oct 2017 and grown to a ~$140 billion company. That's incredible. But the good times have passed, and more challenges are ahead for this conglomerate as competition ramps up in both the gaming (i.e Free Fire) & e-commerce (i.e. Shopee) segments. Some of the competition is known by analysts, some not so much. The high growth days for Free Fire have passed, and there are at least two major disrupters (one old, one new) that will pressure Shoppee's quest for worldwide domination.
Many compare SE to Amazon but it's already traded like a bubbly Amazon in its early days. However, I would argue SE's TAM is much smaller, and further online penetration will be harder to achieve.
Despite major underperformance vs AMZN and other tech giants in the past month, SE's valuation remains lofty. My 2023 SOTP valuation (discounted back to YE 2022) suggests at least an additional 20% downside for SE.
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